companies paying 2013 dividends in 2012...

User Forum Topic
Submitted by flu on December 3, 2012 - 3:47pm

Looks like companies are now prepaying 2013 dividends in 2012... Lol.... Wonder which other companies will follow suit..

You know the reason why they are doing this.....Larry's probably got a boatload of stock.

But it's not only Oracle doing this. Other companies as well.

http://finance.yahoo.com/news/oracle-pay...


Oracle to pay 3 of 2013's dividends this year

PORTLAND, Ore. (AP) — Oracle Corp. will pay three of next year's quarterly dividends this year in an apparent attempt to avoid possible tax hikes for its investors.
The software company said Monday that it will pay dividends for the second, third and fourth quarters of 2013, totaling 18 cents per share, on Dec. 21 to shareholders of record as of Dec. 14.
Oracle is the latest of a string of companies that have moved up quarterly payouts or issued a special end-of-year payment to protect investors from potentially having to pay higher taxes on dividend income starting in January.
Since 2003 investors have paid a maximum 15 percent on dividend income. But that historically low rate will expire in January unless Congress and President Barack Obama reach a compromise on taxes and government spending. As it stands, dividends will be taxed as ordinary income in 2013, the same as wages, so rates will go up depending on which income bracket a taxpayer is in. For the highest earners, the dividend rate would jump to 43.4 percent.
Oracle said that its CEO Larry Ellison, who is also the company's largest shareholder, did not participate in the vote leading to this decision.
Ellison holds roughly 1.1 billion shares of the company's stock, according to FactSet. That would entitle him to an estimated dividend payment of $198.9 million.
Oracle's shares rose 14 cents to close at $32.31 in the regular session. They fell 16 cents in after-hours trading.

Submitted by SK in CV on December 3, 2012 - 4:41pm.

Costco is paying a $7 dividend before year end, compared to about $1 over the last 12 months. Around $7 billion. They're borrowing half of it.

There's been some talk of Apple doing the same thing. They could pay a $50 billion dividend without flinching. Doubt it will happen. Too much institutional ownership that doesn't give a shit.

Submitted by JohnAlt91941 on December 3, 2012 - 10:16pm.

SK in CV wrote:
Costco is paying a $7 dividend before year end, compared to about $1 over the last 12 months. Around $7 billion. They're borrowing half of it.

Yet their own founder and board member is a huge Obama supporter. Seems not with the wallet though.

http://online.wsj.com/article/SB10001424...

Submitted by AN on December 4, 2012 - 12:52am.

JohnAlt91941 wrote:
SK in CV wrote:
Costco is paying a $7 dividend before year end, compared to about $1 over the last 12 months. Around $7 billion. They're borrowing half of it.

Yet their own founder and board member is a huge Obama supporter. Seems not with the wallet though.

http://online.wsj.com/article/SB10001424127887324705104578149012514177372.html?mod=googlenews_wsj


Do As I Say (Not As I Do).

Submitted by flu on December 4, 2012 - 1:38am.

Actually, the number of companies doing this is a lot larger than I thought.

http://www.charlotteobserver.com/2012/11...


Some North Carolina companies are joining a growing number of U.S. firms paying out early dividends before the end of the year, as tax increases on dividends are seen as likely in 2013.

Charlotte-based manufacturing firm SPX is paying shareholders its 25-cent per share quarterly dividend on Dec. 27, instead of in early January, as it did last year. And two weeks ago, Matthews-based Harris Teeter declared a special 50-cent per share dividend, to be paid on Dec. 31.

Executives at SPX and Harris Teeter declined to comment on their dividend decisions. But Charlotte-based apparel retailer Cato Corp. said in November that it was accelerating its 25-cent quarterly dividend to avoid higher tax rates.

“The Board of Directors chose to accelerate the payment to benefit shareholders affected by any 2013 tax increase,” Cato said in a news release. It’s moving the dividend payment up six days, to Dec. 28.

Around the nation, at least 170 companies have declared special dividends in November, more than twice as many as the same month last year, according to news reports. Some of the biggest names in the corporate world are paying out billions of dollars worth of dividends to shareholders.

Costco is giving shareholders a $7 per share payment on Dec. 18, funded with a $3.5 billion debt offering. Las Vegas Sands, the casino company controlled by Sheldon Adelson, will pay shareholders $2.75 a share in a special dividend on the same day.

And Wal-Mart moved up its dividend payment from January to December, dispensing more than $1.3 billion to shareholders before potential higher rates.

Analysts have speculated that some of the biggest corporations, such as Apple and Microsoft, could follow suit in the coming weeks.

Around North Carolina, other companies have said they’ll pay special dividends this year. Mount Airy-based Surrey Bancorp declared a special 18-cent per share dividend this week, to be paid on Dec. 27. Newton-based People’s Bancorp declared a special 5-cent dividend, to be paid on Dec. 14.

Mattress and upholstery fabric maker Culp Inc., in High Point both moved up its regular 3-cent dividend to Dec. 28, and announced a special dividend of 50 cents per share, payable on the same day.

“We are pleased to provide additional and timely opportunities to reward our shareholders,” CEO Frank Saxon said in a statement. With 12.2 million shares outstanding, the special dividend represents about $6.1 million headed to shareholders. The company had more than $28.7 million in cash at the end of its most recent quarter.

Harris Teeter’s special dividend payment will total approximately $24.7 million, based on the company’s more than 49.3 million shares outstanding. Harris Teeter had about $212 million worth of cash at the end of fiscal 2012.

Patel said the companies are doing the sensible thing from a business standpoint by paying shareholders now. “If you know you’re going to pay them in January, why not pay them Dec. 31?” he said.

Patel also said the early dividend payments could help investors who depend on dividends, such as retirees.

Companies often issue special dividends when they feel they have excess cash, but don’t know if they’ll have enough cash flow to sustain a higher regular dividend.

“They have some cash they can dispose of now, but they don’t anticipate having it in the future,” Patel said. “Special dividends, in that instance, are welcome, but the signal is less positive than if they bumped the regular dividend.”

Submitted by flu on December 4, 2012 - 1:38am.

http://www.tennessean.com/article/201212...


HCA Holdings Inc. plans to pay a cash dividend of $2 a share before the end of the year to help its shareholders avoid possible tax rate hikes with the “fiscal cliff” looming in Washington.

The Nashville-based hospital chain announced its plans Monday, about two weeks after distributing a special cash dividend of $2.50 a share.

“Potential future tax rates on dividends was just one of several considerations,” said David Anderson, HCA’s senior vice president of finance and treasurer. “Other factors in our decision to provide this return to our shareholders included the current low-interest-rate environment and market conditions.”

Tom Gallucci, an analyst with Lazard Capital Markets in New York, said the latest dividend HCA plans makes sense conceptually, although the move was a surprise.

“At least when it comes to investing, money in your pocket today is more valuable than money in your pocket tomorrow — no matter the tax implications,” he said.

Submitted by flu on December 4, 2012 - 1:39am.

http://news.yahoo.com/wal-mart-moves-div...

Wal-Mart moves up dividend to avoid "fiscal cliff'

(Reuters) - Wal-Mart Stores Inc on Monday became the biggest corporation yet to move its planned dividend into late December from early January to help shareholders avoid a looming jump in the tax rate due to the so-called fiscal cliff.
The shift by the world's largest retailer will give shareholders, including the family of founder Sam Walton, roughly $1.34 billion in total dividend payments taxed at the current rate.
Fiscal years for retailers typically end in late January, so their dividend payments often are timed differently from those of other types of companies. Exxon Mobil Corp, for instance, had already planned for payouts in December.
"There are complex fiscal and federal tax rate issues that may not be resolved in the next few weeks, despite the ongoing good faith negotiations between the administration and Congress to resolve details related to the fiscal cliff," Wal-Mart said in a statement.
"In light of this uncertainty, the board determined that moving our dividend payment up by a few days to 2012 was in the best interests of our shareholders."

Submitted by flu on December 4, 2012 - 1:42am.

http://www.bizjournals.com/austin/news/2...

Whole Foods declares special dividend

Submitted by flu on December 4, 2012 - 1:49am.

Wow... 170 total companies and counting....

You know you got some serious policy issue once you start seeing these things..

What's gonna be really interesting is to see what happens when these fiscal cliff things kick in.

Me thinks we're gonna have a bigger correction.. Folks in higher income brackets are gonna be pulling out this year...

Meanwhile, so what if these tax cuts are extended to middle class. If they stay invested during this time, me thinks their investments are gonna go south anyway. (And you know, you're gonna have people that just do nothing all the way until jan 2013)...

And when the markets tank, oh boy that's definitely gonna put a damper on the economy...

Anyway, that's my prediction. And I'm putting my money where my mouth is. I've never went to a significant short term money market position in retirement and post tax accounts before... I'm about 68% now.

Submitted by SK in CV on December 4, 2012 - 8:10am.

flu wrote:
Wow... 170 total companies and counting....

You know you got some serious policy issue once you start seeing these things..

What's gonna be really interesting is to see what happens when these fiscal cliff things kick in.

Me thinks we're gonna have a bigger correction.. Folks in higher income brackets are gonna be pulling out this year...

Meanwhile, so what if these tax cuts are extended to middle class. If they stay invested during this time, me thinks their investments are gonna go south anyway. (And you know, you're gonna have people that just do nothing all the way until jan 2013)...

And when the markets tank, oh boy that's definitely gonna put a damper on the economy...

Anyway, that's my prediction. And I'm putting my money where my mouth is. I've never went to a significant short term money market position in retirement and post tax accounts before... I'm about 68% now.

I think what the dividend accelerating thing will do is greatly increase government collections. Taxes on these dividends are all gonna be due by 4/15/13. Instead of at least a year later, or in some cases years and years later. (Costco is paying the equiv of 6 years dividends at once.) It could even be big enough to have a material effect on the annual budget.

We've been through these changes before, with big claims of how it was going to affect the market. It rarely does. It shouldn't. Huge changes to tax treatment of real estate investments almost 30 years ago didn't kill real estate, contrary to pedictions. Taxes on dividends will be higher for a small number of taxpayers. But that doesn't, by itself, create some alternate investment opportunity that is now better than investing for dividends, when it wasn't before. It doesn't make real estate substantially better looking. It doesn't make bonds suddenly better looking. If the lower taxes were the only reason for buying dividend paying stocks, then the difference between alternative investments was slight at best.

Submitted by no_such_reality on December 4, 2012 - 9:06am.

Actually, I think what the companies behaving is foretelling is a change in investor perception of retained earnings. And whether those earnings are better sitting in company for potential acquisitions versus in the investor's pocket looking for another investment.

People need to really pay attention, because all the companies doing this are openly admitting that they cannot provide a greater return on that money than marginal tax increase.

Submitted by SK in CV on December 4, 2012 - 9:24am.

no_such_reality wrote:

People need to really pay attention, because all the companies doing this are openly admitting that they cannot provide a greater return on that money than marginal tax increase.

Huh? I think you're saying something. I have no idea what it is. This makes no sense.

Submitted by bobby on December 4, 2012 - 12:00pm.

he is saying that the recipients/shareholders are getting less money even though the company is paying out more. This is due to the taxman taking a larger portion of the payout.

Submitted by SK in CV on December 4, 2012 - 3:03pm.

bobby wrote:
he is saying that the recipients/shareholders are getting less money even though the company is paying out more. This is due to the taxman taking a larger portion of the payout.

Ok. That makes sense. Though I have no idea how you got that from what he said.

Submitted by no_such_reality on December 4, 2012 - 3:44pm.

No, I'm saying the companies are choosing to pay out now because they estimate that their investors will get less in the future even after they grow it at their rate of return.

So the companies are saying it's better to give the money to investors today at 15% dividend rates, than invest it and provide a capital gain which will likely be taxed at 20% next year.

In essence, if they're just going to hold the money to pay a dividend in the future, that future dividend could be taxed at up to 43.4% plus State Taxes.

Which all just boils down to they can't productively use their available capital.

For example: Let's say Oracle has $10,000 in dividends they're prematurely divesting. If they didn't divest them, they would managing them as an asset. Oracle's Return on Assets is 11% (let's call it 10% for easy math). That $10,000 invested by Oracle at their current return on asset rates would generate $1000 of earnings. At Oracle's current 16 P/E ratio, the $1000 of earning's is work $16,000 of market cap gain, which is $16,000 stock value.

So $10000 given to you today at 15% tax means you get $8500 and Oracle says that's better than paying 20% tax on $16,000 of their current return on asset (which is $12,800) or if distributed as future dividends at max tax rate (43.4%), $9056.

So it's either a knee jerk reaction by petulant CEOs and boards or those companies doing it basically are saying they can't maintain their return on assets going forward by investing more.

Submitted by SK in CV on December 4, 2012 - 4:08pm.

no_such_reality wrote:
No, I'm saying the companies are choosing to pay out now because they estimate that their investors will get less in the future even after they grow it at their rate of return.

So the companies are saying it's better to give the money to investors today at 15% dividend rates, than invest it and provide a capital gain which will likely be taxed at 20% next year.

In essence, if they're just going to hold the money to pay a dividend in the future, that future dividend could be taxed at up to 43.4% plus State Taxes.

Which all just boils down to they can't productively use their available capital.

For example: Let's say Oracle has $10,000 in dividends they're prematurely divesting. If they didn't divest them, they would managing them as an asset. Oracle's Return on Assets is 11% (let's call it 10% for easy math). That $10,000 invested by Oracle at their current return on asset rates would generate $1000 of earnings. At Oracle's current 16 P/E ratio, the $1000 of earning's is work $16,000 of market cap gain, which is $16,000 stock value.

So $10000 given to you today at 15% tax means you get $8500 and Oracle says that's better than paying 20% tax on $16,000 of their current return on asset (which is $12,800) or if distributed as future dividends at max tax rate (43.4%), $9056.

So it's either a knee jerk reaction by petulant CEOs and boards or those companies doing it basically are saying they can't maintain their return on assets going forward by investing more.

I think you misread it a bit. Since corporate tax rates have not yet changed, nor are are there any serious talks of them changing (at least their not near as imminent as individual rate hikes are), the internal rate of return for the companies won't be changing. What these dividends tell me is that these companies that are declaring special dividends (Costco for sure, Oracle maybe) have been sitting on way too much cash, without anything good to do with it. We've had these low individual tax rates on dividends for 10 years. If they can do it now, they could have been doing it for years.

For those that are simply accelerating 2013 Q1 dividends into 2012, I don't think it's indicative of anything other than logical tax planning. Pay out a January dividend a few days early. No tax ramifications for the company, possible ramifications for some of the stockholders. They have to pay the taxes a year sooner, with a possible lower tax rate. No biggie.

Submitted by no_such_reality on December 4, 2012 - 4:23pm.

No, you misunderstood what I said SK.

Quote:

What these dividends tell me is that these companies that are declaring special dividends (Costco for sure, Oracle maybe) have been sitting on way too much cash, without anything good to do with it.

In a nutshell, that's what I said. A simple move a January payment to December, that's nothing.

A special dividend. A pay the first 3 quarters of 2013 in December. That's 'we don't have anything worth while to do with the money'.

Which then begs the question, why have they been sitting on it...

Submitted by dumbrenter on December 4, 2012 - 5:37pm.

no_such_reality wrote:
No, you misunderstood what I said SK.

Quote:

What these dividends tell me is that these companies that are declaring special dividends (Costco for sure, Oracle maybe) have been sitting on way too much cash, without anything good to do with it.

In a nutshell, that's what I said. A simple move a January payment to December, that's nothing.

A special dividend. A pay the first 3 quarters of 2013 in December. That's 'we don't have anything worth while to do with the money'.

Which then begs the question, why have they been sitting on it...

I get what you are saying but you are saying two different things:
1. the company RoA estimate is such that they do not think they can beat the increase in tax rates in dividends, hence figure it is better to return shareholder money.
2. They had a low dividend tax for a decade where they never paid out that good, but now that it is about to expire, they suddenly fell in love with returning shareholders some money.

Submitted by SK in CV on December 4, 2012 - 8:00pm.

dumbrenter wrote:

I get what you are saying but you are saying two different things:
1. the company RoA estimate is such that they do not think they can beat the increase in tax rates in dividends, hence figure it is better to return shareholder money.

This is kinda what I thought he meant. Hopefully he didn't. It makes no sense. Individual tax rates have no bearing on a corporation's internal rate of return.

Submitted by no_such_reality on December 4, 2012 - 11:17pm.

SK in CV wrote:
dumbrenter wrote:

I get what you are saying but you are saying two different things:
1. the company RoA estimate is such that they do not think they can beat the increase in tax rates in dividends, hence figure it is better to return shareholder money.

This is kinda what I thought he meant. Hopefully he didn't. It makes no sense. Individual tax rates have no bearing on a corporation's internal rate of return.

Individual tax rates changes the investor's perceived value of the company retaining those earnings on assets.

By accelerating disbursements, management is essentially agreeing with the lower value.

Management is admitting that their planned growth from the additional asset (cash) investment will be worth less to the investor in year than having the cash today.

Submitted by SK in CV on December 5, 2012 - 1:05am.

no_such_reality wrote:

Individual tax rates changes the investor's perceived value of the company retaining those earnings on assets.

If the higher individual tax rate on dividends occurs, it will be more cost effective to retain the earnings in the future.

no_such_reality wrote:
By accelerating disbursements, management is essentially agreeing with the lower value.

I think accelerating the dividends beyond a few quarters acknowledges that these companies have retained more than was needed for operations and current expansion plans. It says nothing about the future. As noted, because the rates at the individual level are anticipated to be higher for dividends than capital gains, in the future retention of the earnings may be the more effective strategy.

no_such_reality wrote:
Management is admitting that their planned growth from the additional asset (cash) investment will be worth less to the investor in year than having the cash today.

I dont think any such claim can be made about the future. Dividends may be worth more to the investor today than a year from now, but solely based on the tax considerations, the value of cash availability to the company is unlikely to change. It's an acknowledgment, at most, of a lack of concern for shareholders in the past.

The acceleration of the dividends is a pure tax play for stockholders.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.